“These loyal customers get no benefit from competition, their prices are likely to be higher, and there is a lost opportunity to create downward pressure on price.”
When asked what New Zealand could learn from the UK study, Martin says the key will be to identify the key issues quickly.
“This will be easier to do if you can reference a reliable set of data that shows the true shape of the market,” said Cave. “In the UK we conducted interviews with 7000 households to discover exactly what they paid for electricity and if they had ever switched supplier.
“It was an eye-opener because we could see in plain sight the substantial difference in costs between engaged and disengaged consumers, and the reasons why some were not engaging.
“Most worryingly was the discovery that the disengaged customers consisted disproportionately of low income consumers. We could see very clearly early on that there were substantial faults in the way the market was working, and that this should to be the focus of our review.”
“The New Zealand inquiry should then be able to identify a set of remedies which addresses problems if any are to be found, these may include demand-side and more intrusive supply-side measures or another intervention that we don't yet know of,” said Cave.
Click here to read Martin Cave’s full paper: Retail Lessons for New Zealand from the UK Energy Market Investigation.
From left to right: Greg Houston, Professor Martin Cave and Luke Blincoe.